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Wednesday, April 30, 2008

Eskom is lying to consumers to convince them and the national regulator of the need to implement an astronomical 60 percent tariff hike, according to economist Mike Schussler.

Schussler told an audience at a congress on the electricity crisis in Pretoria on Thursday that Eskom did not supply the cheapest electricity in the world.

"The average Eskom residential tariffs are 274 percent higher than those charged by Eskom for power sold to our neighbours," he said.

The congress was held at the launch of trade union Solidarity's institute for constitutional and labour law, which will serve as a platform to protect the constitution.

Schussler tore into a commonly used Eskom graph, compiled from research conducted by London consulting group NUS, used to show that South Africa's electricity was a whopping 75 percent cheaper than the next country, Canada.

Eskom has often claimed that South Africa has the cheapest electricity in the world.

"South Africa does not have the cheapest electricity in the world - a carefully selected group of industrial countries was used rather than any developing countries," he said.

Schussler said 10 other countries out of a survey of 55 countries had lower household electricity tariffs in dollar terms.

These countries included developing countries such as Argentina, Russia, India, China and Paraguay.

Minerals and Energy Minister Buyelwa Sonjica recently said that should the proposed electricity price hike be finalised, South Africa would still have the cheapest electricity in the world.

Not so, said Schussler.

"South African household rates are in the bottom third of international rates, but if electricity tariffs are implemented, we may end up having some of the most expensive electricity in the world, even more expensive than France."

Schussler said that in the 27 EU countries, coal - the cheapest form of fuel - composed only 22,5 percent of all primary sources when generating energy.

He said natural gas and nuclear sources were the more commonly used sources of fuel.

Schussler said this was because the world was moving to cleaner energy sources, despite those costing more than coal.

"However, on average, fossil fuels (coal) comprise 93 percent of the resources used to produce electricity in South Africa," he said, explaining why those countries paid so much for electricity.

Schussler said that according to Eskom's 2007 annual report, the price of electricity sold to both industrial and international clients were below the cost of production.

"For more than 11 years Eskom has sold electricity at below cost to international customers."

Schussler said that according to Statistics South Africa, household electricity prices for metropolitan areas went up by 9,8 percent over the last year ending in February 2008.

This meant that yet again electricity price increases exceeded the average inflation rate in South Africa.

Solidarity spokesperson Jaco Kleynhans said that in those 11 years when Eskom sold electricity at below cost there was a loss of R3,3-billion, which South African consumers paid for.

"These figures prove that South African households have been subsidising Eskom's other clients for years.

"This is unacceptable and Solidarity will do everything in its power to oppose any electricity price increase higher than the inflation rate.

"This means that no additional increases must be approved for this year, since an increase of more than 14 percent has already been granted," he said.

Independent engineer and former Eskom employee Andrew Kenny said the reason for the electricity crisis was simple: Eskom and the government failed to build power stations when it was obvious that the country would need them.

Kenny said the immediate cause of the problem - which was seen at the start of the year - was problems with the coal supply.

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Opinion(s):

Is that you Alpha Male?I pay on average $50.00 a month in WA.Thats for a house of four with swimming pool.When I left SA in 2005 I was paying over R1000.00 a month.That equated to $220.00 then...Perhaps Eskom things we are all as dumb as their bosses?

Yeah folks, well spotted, Doberman is the old Alpha Male. Alpha Male is connected to SAS (who do a fine job) and so I decided, without leaning on the name recognition I got there, I thought it only fair to do my blog on the back of my own sweat and efforts.

SAS have been very supported and I thank them for that. We can never have too many of these blogs.